Govt meets key IMF demand, doubles petroleum levy on high-speed diesel

After showing a lot of hesitance, the government went ahead with the increase in the petroleum levy on high-speed diesel to almost double it from Rs12.59 to Rs25 per litre, representing a hike of Rs12.41, with effect from December 1, 2022.

The decision meets a key IMF (International Monetary Fund) demand which will help releasing the latest tranche for the cash-starved country, thus ending uncertainty in financial markets and economy.

It has also increased the levy on kerosene oil by Rs1.03 to Rs7.01 per litre and on light diesel oil (LDO) by Rs7.49 to Rs15.39 per litre.

In Pakistan, diesel is widely used in the agriculture and transport sectors with the army being a key user of kerosene oil in the northern parts of the country. Its demand increases especially in the winter season for cooking and heating purposes. LDO is used by the industry.

The government had already increased the petroleum levy on petrol and high octane blending component (HOBC) to Rs50 per litre, which is the maximum levy approved in the budget.

Separately, the Oil and Gas Regulatory Authority (OGRA) increased their margins and freight rates, in a move that will increase the earnings of oil marketing companies (OMCs),.

According to a notification, the margin on petrol is increased by Rs0.32 to Rs4 per litre and for diesel by Rs1.32 to Rs5 per litre.

The Economic Coordination Committee had already approved margins of Rs6 per litre on petrol and diesel for the OMCs. However, it clarified that it would be subject to the variation in oil prices. Hence, the OMCs were expecting that the margins would be raised to Rs6 per litre.

Earlier, the government had approved margins of Rs7 per litre for the petroleum dealers but not for the OMCs, which led to protests by them.

Later, the ECC endorsed an Rs6 per litre margin, but the recent increase was not in line with expectations of the oil industry.

It is important to note that freight, calculated by OGRA, does not go to the national exchequer. It is the cost of moving petroleum products across the country, which is paid to the OMCs, depending on how much and where they transport products.

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